New figures from the Insolvency Service’s latest personal insolvency figures have risen by 60% in October 2020 when compared to September in England and Wales.

Personal insolvencies increased to 11,939 in October 2020 compared to September’s figure of 7,458, and were higher than October 2019’s figure of 10,030.

There were, on average, 6,154 IVAs registered in each of the 3 months ending October 2020, 9% lower than the rolling 3-month average observed in the same period ending October 2019. Figure 3: The average number of IVAs registered in each of the last three months ending October 2020 remained lower than the same three-month period last year

There were 1,572 DROs and 1,048 bankruptcies (the latter was made up of 970 debtor applications and 78 creditor petitions). There was a 37% reduction in DROs and a 25% reduction in bankruptcies in October 2020, compared with the same month last year. The reduction in bankruptcies was driven by a 17% fall in debtor applications and a 67% reduction in creditor petitions.

Commenting on the figures, Colin Haig, President of insolvency and restructuring trade body R3 and Head of Restructuring at Azets said “Personal insolvency numbers, meanwhile, were higher in October 2020 than in the same month in 2019, almost entirely due to a notable increase in Individual Voluntary Arrangements, which were around half again as many as in October 2019, and nearly double the number from September 2020. Bankruptcies and Debt Relief Orders rose modestly in number compared with September, but were around a third lower compared with October 2019.”

“Even with the announcement that furlough will be extended until the end of March, job losses are mounting, and many people are entering the run-up to the festive season in a precarious financial position. The FCA found that around 12 million people in the UK currently have low financial resilience, where just one adverse life event can be enough to turn ‘just about managing’ into an immediate crisis situation.”

“With constraints on usual levels of pre-Christmas spending, in sectors from bricks-and-mortar retail to hospitality, there is a danger that reduced consumer outlay, exacerbated by personal financial uncertainty, leads to more pain for businesses, who will then be forced to consider more redundancies, in a vicious circle effect.”

Louise Brittain, Restructuring and Insolvency Partner at Azets, said: “The October insolvency numbers suggest that UK households are at increasing risk from carrying higher levels of personal debt. This is perhaps no surprise given the economic impact of the pandemic but it’s only likely to get more difficult as the expected levels of unemployment increases into the early part of next year.”

“The greater risk carried by UK households is made clear by the doubling of Individual Voluntary Arrangements but the lower number of debt recovery orders, which are for debts under £20,000.”

“These numbers reflect comments made by some UK banks that are again concerned about the levels of individual debt and the ability of individuals to service that debt.’